A woman passes by the United States Capitol building in Washington on June 25, 2020.
Al Drego | Reuters
After declining for three weeks, the number of borrowers who deferred their monthly mortgage payments due to the coronavirus increased once again.
The number of active tolerance plans increased by 79,000 last week, erasing about half of the improvement seen since the May 22 peak, according to Black Knight, a mortgage technology and data firm. In comparison, the number of borrowers in leniency plans fell by 57,000 the previous week. The increases occurred every day for the past five business days.
As of Tuesday, 4.68 million homeowners were on leniency plans, allowing them to delay their mortgage payments for at least three months. This represents 8.8% of all active mortgages, up from 8.7% last week. Together, they represent just over $ 1 trillion in unpaid capital.
The mortgage rescue program, part of the CARES Act, which President Donald Trump signed in March, allows borrowers to miss monthly payments for at least three months and potentially up to a year. Those payments can be remitted either in payment plans, loan modifications, or when the house is sold or the mortgage is refinanced.
While some borrowers who initially applied for mortgage bailouts in March and April ended up making their monthly payments, the vast majority now do not. Mortgage bailout figures were expected to improve as the economy reopened and job losses slow down. But this increase is a red flag for the market that homeowners are still struggling as coronavirus cases continue to rise in several states.
By loan type, 6.9% of all Fannie Mae and Freddie Mac-backed mortgages and 12.5% of all FHA / VA loans are currently on leniency plans. Another 9.6% of loans in private label securities or bank portfolios are also in patience.
Volumes increased for all types of loans, but were sharper for FHA / VA loans. The FHA offers low advance loans to borrowers with lower credit scores. Such loans are popular with first time home buyers. The number of FHA / VA borrowers in leniency plans increased by 42,000 last week, while exemptions for business and non-government-funded loans increased by 25,000 and 12,000, respectively.
At the current level, mortgage servicers may need to advance up to $ 3.5 billion per month to holders of government-backed mortgage securities in Covid-19-related patience. That adds up to $ 1.4 billion in tax and insurance payments to be made on behalf of borrowers.
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